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FIN611 GDB Fall 2019 Solution & Discussion

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Share the GDB Question & Discuss Here.... 

A renowned cellular and telecommunication company has acquired 5G license for PKR 50 million. The company’s management has two options as under:

1.       The Company may develop 5G wireless network to expand their customer base. This project is expected to complete within 5 years. For this, the company must acquire a bank loan of PKR 100 million for a period of 5 years.

2.       The company has another option to further sell the 5G license to any third party.

 

Required: For each of the above option, describe the accounting treatment on capitalization of the license and the related borrowing cost under the related IASs. Journal entries are not required.

Kindly send the solution today is the last date for submiting GDB

FIN611 Advanced Financial Accounting GDB Solution & Discussion Fall 2019


Solution Idea:

The license has been exclusively acquired to operate the wireless network. The fact that the license can be used or licensed to a third party is irrelevant.

The acquisition of the license is the first step in a wider investment project (developing the network). It is part of the network investment, which meets the definition of a qualifying asset under IAS 23.

#FIN611 GDB IDEA SOL 2019-20

Answer:
The license has been exclusively acquired to operate the wireless network. The fact that the
license can be used or licensed to a third party is irrelevant.
The acquisition of the license is the first step in a wider investment project (developing the
network). It is part of the network investment, which meets the definition of a qualifying asset
under IAS 23.

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